In the Insolvency and Bankruptcy Board of India’s exam for Registered Valuer for the Securities and Financial Asset class, FIMMDA Guidelines is part of Valuation Application chapter from which around 1-2 MCQ are expected for sure. For clearing this Registered Valuer exam of IBBI, one need not go into very minute detail about this FIMMDA Circular, however certain points related to valuation are really very important for the IBBI registered Valuer exam point of view. 

For the purpose of IBBI Registered valuer exam from August 2021 onwards, the FIMMDA circular issued on 26^th March 2021 bearing number FIMCIR/2019-20/ 26 is relevant.

What is FIMMDA

FIMMDA stands for The Fixed Income Money Market and Derivatives Association of India (FIMMDA). It is an Association of Commercial Banks, Financial Institutions and Primary Dealers. FIMMDA is a voluntary market body for the bond, Money And Derivatives Markets.

FIMMDA has members representing all major institutional segments of the market. The membership includes Nationalized Banks such as State Bank of India, its associate banks, Bank of India, Bank of Baroda; Private sector Banks such as ICICI Bank, HDFC Bank, IDBI Bank; Foreign Banks such as Bank of America, ABN Amro, Citibank, Financial institutions such as ICICI, IDBI, UTI, EXIM Bank; and Primary Dealers.

Objectives of FIMMDA

• To function as the principal interface with the regulators on various issues that impact the functioning of these markets.
• To undertake developmental activities, such as, introduction of benchmark rates and new derivatives instruments, etc.
• To provide training and development support to dealers and support personnel at member institutions.
• To adopt/develop international standard practices and a code of conduct in the above fields of activity.
• To devise standardized best market practices.
• To function as an arbitrator for disputes, if any, between member institutions.
• To develop standardized sets of documentation.
• To assume any other relevant role facilitating smooth and orderly functioning of the said markets.

As per the FIMMDA Circular, different valuation mechanism has been prescribed for various government SLR and Non SLR securities like Central Government Securities, State Government Securities, Treasury Bills, Floating rate Bonds, Inflation Indexed Bonds, Other SLR Bonds, Special Securities issued by Government of India. FIMMDA has also defined various terms related to stock market and fixed income securities.

As per the applicable FIMMDA Circular, Valuation of Non-SLR Bonds is to done as follows: –

TRADED BONDS: – As per RBI Master Circular – Prudential Norms for Classification and Operation of Investment Portfolio by Banks dated July 1 2015, “where the debentures/ bonds are quoted and there have been transactions within 15 days prior to the valuation date, the value adopted should not be higher than the rate at which the transaction is recorded on the stock exchange”.

FIMMDA’s role for providing traded prices (in compliance of the RBI guideline)

In order to obviate the need to refer to websites of different Exchanges, FIMMDA consolidates and puts up the following traded data on its website on daily basis.

1. On the working day next to the last trading day Corporate Bond Trades during the last 15 calendar days (Including probable Failed Trades but excluding Inter Scheme Transfer deals done by MFs)” are given.
2. This is a provisional sheet showing the volume weighted average price and volume weighted average yield of a bond traded and reported on the Reporting Platforms of NSE (CBRICS), BSE (ICDM) and MCX SXFIRST.
3. As decided in the valuation committee meeting held on 01.01.2017 FIMMDA is publishing primary issuance data along with the secondary market trades with a separate remark as ‘secondary/primary’ for valuation purpose.
4. If a bond is traded more than one day during the last 15 calendar days, then the data pertaining to the latest trades are only given.
5. This sheet consolidates all trades in the individual bonds (whether the settlement is T+0, T+1 or T+2) reported on platforms of all three Exchanges.
6. On the third working day after the last trading day, when the fate of T+2 trades will also be known, “Corporate Bond Trades during the last 15 calendar days (Excluding failed trades and Inter Scheme Transfer deals done by MFs)” are given.

FIMMDA also defines Credit quality is an indicator of the ability of the issuer of the fixed income security to pay back his obligation. The credit quality of fixed-income securities is usually assessed by independent rating agencies such as Standard & Poor’s, Moody’s in the U.S. and CRISIL in India. Most large financial institutions also have their own internal rating systems. As per FIMMDA, by convention, the term “Money Market” refers to the market for short-term requirement and deployment of funds. Money market instruments are those instruments, which have a maturity period of less than one year. The most active part of the money market is the market for overnight call and term money between banks and institutions and repo transactions. Call Money / Repo are very short-term Money Market products.

From this piece of information, you must have realised by now that how important this concept of FIMMDA Circular is from the point of view of IBBI registered valuer Examination. Therefore, Student’s unfamiliarity with FIMMDA Circular, its various methodologies etc. and other concepts related to this (as mentioned in IBBI Securities and Financial Asset class syllabus) assuming that these areas are complex is not justified. Therefore, I would like to encourage you all to study this concept precisely and adequately. You can easily score those 1 to 3 marks in valuer examination that will make the difference between passing and failing.

What is eventually important for you is to study strategically and work on your weak areas with complete dedication so that you could pass the IBBI registered valuer examination. And for passing that examination with a minimum of 60% marks, these small and easy areas make a lot of difference. RVMOCKTEST.ONLINE is there to help you in this path of becoming a Registered Valuer by making you exam ready. You can check your preparedness and identify your mistakes, by appearing in online mock tests of RVMOCKTEST.ONLINE that will boost your confidence and increase your chances of clearing in one single shot!!

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